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G20 growth target can't be enforced

ELEANOR HALL: To the G20 agreement between finance ministers and central bankers to lift global growth by 2 percentage points. The Treasurer Joe Hockey says this is a breakthrough that could add $2 trillion to the global economy.

But the deal is not enforceable, and the director of the Institute of Global Finance at the University of New South Wales, Professor Fariborz Moshirian, told our business editor Peter Ryan that the non-binding nature of the agreement does little to help the G20 shake its reputation as just a high-powered talkfest.

FARIBOUZ MOSHIRIAN: That is the challenge of our generation, in the sense that now we have got a global forum called G20. They are coming up with some key objectives, and yet when it comes to actual implementation of these objectives, there is no mechanism within G20 to ensure implementation of these objectives.

PETER RYAN: So, they're talking about growing global growth by 2 percentage points over five years. How can that happen?

FARIBOUZ MOSHIRIAN: That is the very issue that markets will question, because there is not any coordinated efforts on the part of G20, because each member country has got its own domestic priority, and therefore question is whether there is an effective implementation of such objective, when you have diverse domestic objectives.

PETER RYAN: So when the rubber hits the road, it's really down to whether or not local economies or individual G20 members have the will or the ability, the political ability, to implement any of these reforms?

FARIBOUZ MOSHIRIAN: That has been basically been the track record of G20 since global financial crisis, with the exception of the London Summit 2009 when they tried to ensure we don't end up with the second Great Depression. Since 2009, the track record of G20 has not been good, and for that very reason, market sometimes is sceptical about what they see as part of their communiqué.

PETER RYAN: But how do you rate the outcome, even though it is a soft aspirational target?

FARIBOUZ MOSHIRIAN: I think to have an aspirational target is good. We should encourage such targeted goal, but also we should make them accountable. The question here is, over the next five years, how many of these finance ministers will be around to be accountable will be also another issue.

PETER RYAN: Making nations accountable is one this, but it's important to note that none of this can be enforceable.

FARIBOUZ MOSHIRIAN: That is the very weak point of G20, because they are relying on what is called peer review. Peer review is not a replacement for executive power; it's not a replacement for coordinated efforts amongst the nations which are forming G20, and for that very reason we need to look at the actual structure of G20 when it comes to its objectives.

PETER RYAN: You've read through the communiqué, which they've managed to get down to two pages, which was something that Joe Hockey was very keen to see. How do you describe the language - it's fairly open, and there would be a number of outs?

FARIBOUZ MOSHIRIAN: Well, that's the issue. Whether question is whether it's two page or 27 pages, as it happened last year for instance, that is secondary issue. I think the key issue is what mechanism is in place to ensure that every single objective, no matter how brief they are, are going to be implemented. That is what the market is interested in.

PETER RYAN: And the Treasurer, Joe Hockey, appears to have been successful in using the G20 as a platform for talking about the big structural reforms in Australia - raising the retirement age, looking at the cost of universal health coverage, and the big one, labour market reform.

FARIBOUZ MOSHIRIAN: Well, there is no question that there is a synergy between what has happened in G20 Finance Ministers Summit and some of the domestic agenda of the Government, but we shouldn't also forget that we've again in other fora, such as in environmental forum, leaders come back to their own country with environmental objectives, but at the same time we don't see an effective coordination amongst nations. So we should welcome what's happening, but again we need to be very cautious when it comes to key objectives.

PETER RYAN: Now, just fast forwarding to the G20 leaders summit in Brisbane in November, what are you expecting to see out of that? Do you have a crystal ball?

FARIBOUZ MOSHIRIAN: Well, there is no question that the G20 finance ministers created the momentum for the Brisbane summit, but question first of all is what will happen from now until Brisbane? It's uncertainty in the global economy when it comes to China, US policy and eurozone, but there is no question that there is good will on the part of all leaders to see stronger economic growth in the midst of banking, bailout and consolidation of financial systems. It's really a matter of wait and see.

ELEANOR HALL: And that's Fariborz Moshirian, director of the Institute of Global Finance at the University of New South Wales, speaking to our business editor Peter Ryan.